DOJ Scrutinizes Netflix-Warner Merger Over Creator 'Monopsony' Risks

The Justice Department’s investigation into Netflix Inc.’s proposed $72 billion takeover of Warner Bros. Discovery (WBD) marks a critical evolution in antitrust enforcement within the media sector. Rather than focusing solely on consumer-facing metrics like subscription prices, regulators are zeroing in on 'monopsony' power—the leverage a dominant buyer holds over its suppliers. In this context, the suppliers are the filmmakers, showrunners, and producers who provide the lifeblood of the streaming industry. By examining whether Netflix wields anticompetitive leverage in programming negotiations, the DOJ is signaling that the 'upstream' harm to creators is just as legally significant as 'downstream' harm to viewers.

This regulatory approach mirrors the DOJ’s successful 2022 challenge to the Penguin Random House acquisition of Simon & Schuster, where the court agreed that a merger could be blocked based on its impact on author compensation. For the legal and RegTech sectors, this represents a broadening of the antitrust toolkit. A combined Netflix-WBD would control a massive share of the global production budget, potentially allowing it to dictate terms that eliminate traditional 'backend' participation—the royalties creators earn from a hit's long-term success—in favor of Netflix’s preferred 'cost-plus' model, which pays more upfront but caps future earnings.

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The Justice Department’s investigation into Netflix Inc.’s proposed $72 billion takeover of Warner Bros.

Industry context suggests this probe is a direct response to the rapid consolidation of the streaming landscape. As legacy media companies like Warner Bros. Discovery have struggled with debt and the transition from linear TV, Netflix has emerged as the undisputed market leader. The DOJ is likely concerned that if the industry’s most prolific buyer (Netflix) absorbs one of its oldest and largest production houses (Warner Bros.), the number of alternative 'shops' for high-end creative projects will dwindle to a handful of players, including Disney and Apple. This lack of competition for content could lead to a 'race to the bottom' regarding creative freedom and financial terms.

Furthermore, the investigation will likely scrutinize Netflix’s use of proprietary data and algorithms in the negotiation process. Regulators may explore whether Netflix’s data advantage—knowing exactly how much a specific genre or actor is worth to their subscriber base—creates an information asymmetry that prevents creators from negotiating fair market value. If the DOJ finds that this data-driven dominance, combined with WBD’s vast library, creates an insurmountable barrier to entry for smaller studios, the merger could face a formal challenge or be forced into significant divestitures of production assets.

Looking forward, the outcome of this probe will set a precedent for future media consolidations. If the DOJ successfully argues that creator leverage is a protected market interest, it will force a total reassessment of M&A strategy in the entertainment industry. Legal teams will need to move beyond simple market-share calculations and begin performing 'creative impact audits' to anticipate regulatory pushback. The next few months will be pivotal as the DOJ interviews top-tier talent and talent agencies to build a case that the streaming giant’s power has already reached a tipping point.